Dongbu Construction Refutes Liquidity Crisis: "Secured 300 Billion Won in Liquidity"

"Securing Liquidity through Overseas Site Payments, Collection from Completed Sites, and Loan Recovery"
"Decrease in Cash Equivalents Due to Maturity of Debt Securities Repayment"

Dongbu Construction recently refuted concerns raised by some securities firms regarding liquidity risks related to real estate PF defaults, stating that "there is no problem."

On the 5th, Dongbu Construction explained, "We secured 300 billion KRW in liquidity in the fourth quarter of last year, maintaining financial stability, and the scale of PF contingent liabilities is very low, so the risk is limited."

Dongbu Construction stated that it proactively secured 300 billion KRW in liquidity through payments for overseas construction sites, collections from completed sites, and loan recoveries. Going forward, it plans to execute low-interest business loans as scheduled while continuously repaying high-interest operating funds to reduce interest expenses and debt repayment burdens.

Recently, a securities firm mentioned that the Taeyoung Construction incident could make short-term financing more difficult for small and medium-sized construction companies and cited Dongbu Construction as a vulnerable company. It pointed out that as of the end of September last year, Dongbu Construction's short-term borrowings amounted to 418.9 billion KRW, but its cash equivalents were only 58.3 billion KRW.

In response, Dongbu Construction stated, "The temporary decrease in cash equivalents as of the third quarter was due to the repayment of high-interest debt securities maturing to reduce financial costs."

Of the 480 billion KRW in net borrowings on a consolidated basis as of the third quarter of 2023, about 350 billion KRW is a land sale payment refund bond loan for purchasing LH public land, which effectively holds a sovereign credit rating, so there is no risk. Dongbu Construction explained that it repaid about 22 billion KRW in the fourth quarter of last year, and borrowings are continuously decreasing.

Furthermore, it denied any issues with PF contingent liabilities. As of the third quarter of last year, Dongbu Construction's PF contingent liabilities were in the 200 billion KRW range based on guarantee limits. Dongbu Construction explained, "Considering that the total PF market size reaches 134 trillion KRW, this is evaluated as very low within the industry," adding, "Most of the relevant sites have good sales rates or secured construction costs, so they differ from the companies recently mentioned."

Dongbu Construction said, "The fact that Seoul Credit Rating affirmed the limited PF risk of Dongbu Construction and maintained its rating in December last year proves this."

Looking at Dongbu Construction's sales composition, public construction accounts for 50%, and the housing business accounts for about 30%. Dongbu Construction believes that expansion in the non-housing sector can sufficiently compensate. Dongbu Construction explained, "New sites with excellent future sales cost ratios are expected to start construction this year, and profitability will also improve."

A Dongbu Construction official said, "Amid negative forecasts in the market due to recent adverse events caused by PF affecting the overall construction industry, there is concern about secondary damage to other companies due to excessive interpretation and rumor generation," adding, "We are currently maintaining a stable financial structure through liquidity 확보 and thorough risk management."